BREAKINGVIEWS-Deripaska may not refuse new Norilsk buyout offer

MOSCOW, Feb 14 (Reuters Breakingviews) - The end of the
three-year long shareholder spat at Russian miner Norilsk Nickel
(GMKN.MM) may be in sight. Oleg Deripaska, whose RUSAL (0486.HK)
group owns a 25 percent stake in the Russian miner, has received
an offer even he must find hard to resist. Norilsk is offering
him $12.8 billion to buy four-fifths of his stake in the company

-- a thumping 40 percent premium to current market price. The
-- a thumping 40 percent premium to current market price. The
end of Deripaska's nickel ambitions would come with a handsome
profit, which would allow RUSAL to pay off its debt in one go.

The offer represents a significant improvement on Norilsk's
proposal last December to buy RUSAL's entire 25 percent stake
for $12 billion. It also envisages a two-year agreement under
which Norilsk would direct the voting and disposal of RUSAL's
remaining 5 percent.

Whereas RUSAL derisively dismissed previous offers, this
time it has responded tersely that the latest one will be
considered. Two of RUSAL's core shareholders, Mikhail Prokhorov
and Viktor Vekselburg, had already been warming towards a sale.
Deripaska himself was rumoured to be willing to sell the stake
for $16 billion. The offer of $12.8 billion for 80 percent of
that stake implies that his valuation target has been achieved.

In any case Deripaska will be hard-pressed to do better. The
$16 billion valuation would imply a tidy profit over the $14
billion that RUSAL is estimated to have paid for its Norilsk
stake in 2008. RUSAL could always argue that there is still
plenty of hidden value in Norilsk, but even then it would be
hard to see how this could justify rejecting the bird in the
hand for uncertain future rewards. After all, the implied $64
billion valuation for Norilsk is well above the $50 billion that
RUSAL said it was targeting five months ago. Meanwhile, RUSAL
continues to chastise Norilsk for wretched corporate governance,
which if anything is deteriorating as Deripaska's opponents
strive to outmanoeuvre him.

Deripaska still has some cards left to play, including a
recent court injunction in the West Indies that may block the
voting rights of Norilsk subsidiaries. But his chances of
reasserting his diminishing grip over Norilsk are slim. By
accepting such a handsome pay-off, he would in effect have
played his weak poker hand with great skill.

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CONTEXT NEWS

-- Russian mining giant Norilsk Nickel made a new offer on
Feb. 11 to buy out aluminium company RUSAL, a 25-percent
shareholder in Norilsk. Norilsk proposed that one of its
subsidiaries would buy a 20 percent stake in Norilsk from RUSAL
for $12.8 billion. RUSAL and the buyer would also enter into a
two year shareholders' agreement which would provide the buyer
with rights to direct the voting and disposal of the remaining
Norilsk shares held by RUSAL. The proposal lapses at 1800 Moscow
time on March 4.

-- Responding to the proposal, RUSAL said in a brief
statement: "The Board of Directors of RUSAL, in accordance with
the internal corporate procedures, instructed the Norilsk Nickel
committee of RUSAL Board of Directors, to examine and discuss
the offer received."

-- In December, Norilsk offered to buy all RUSAL's
25-percent stake for $12 billion. RUSAL responded quickly to the
previous Norilsk offer by rejecting it. "For RUSAL an investment
in Norilsk Nickel is a strategic one and we do not intend to
sell our stake," it said.

-- RUSAL is engaged in a public dispute with both Interros
Group, which also owns 25 percent in Norilsk, and Norilsk's
management. It has called an Extraordinary General Meeting of
Norilsk shareholders on March 11, where it hopes to vote out the
board of directors and elect new representatives. RUSAL failed
in a similar attempt at an Extraordinary General Meeting in
October.